SEC Approves All-Electronic Offering


Web based offering approved by Commission for First Time

By John M. Baker, Esq.

The Securities and Exchange Commission has for the first time approved an offering that is to be made only by means of the World Wide Web. In a rare action, the registration statement for The American Separate Account 5 variable annuity contracts was declared effective by the members of the Commission in a 2-1 split vote.

The Commissioners explained their votes in an equally rare statement. Release Nos. 33-8028, 34-44981, IC-25244 (Oct. 25, 2001). The American Life Insurance Company of New York is offering the annuities through, where the “ Direct Annuity” currently has star placement. The annuities are offered with no sales charges, withdrawal fees, or insurance charges, savings presumably made possible by their online offering, the absence of printed materials, and the lack of a death benefit. The underlying funds, of course, will still charge their fund fees.

Commissioner Hunt expressed concern that the web-only approach puts investors at risk when a transaction is posted to an investor’s account or when there is a material change to the prospectus. Surprisingly, his concerns could have been met inexpensively and electronically, with automated emails. Commissioners Pitt and Unger, however, suggested that it would not be fair to the issuer to stop its transaction without full consideration of the legal and economic consequences of SEC intervention.


Copyright 2001, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, To subscribe to FundLaw, send a blank e-mail to

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.



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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

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